OTTAWA — The federal government is giving the Alberta government a passing grade for its industrial carbon tax, avoiding at least one showdown with the province over climate change.
In late October, Alberta unveiled a system to impose a $30-a-tonne tax on greenhouse-gas emissions from big industry, including the oilsands. The tax will be applied on 10 per cent of emissions produced by the province’s biggest polluters starting in 2020.
Federal Environment Minister Jonathan Wilkinson said Friday his department agrees that plan will meet federal requirements that each province have a price on pollution from big industrial emitters. Provinces that don’t will have a federal version imposed on them. The government amended regulations to exempt Alberta from the federal system for industry on Friday.
“We are very pleased that Alberta has now agreed to commit to putting in place a price on pollution at least with respect to heavy emitters,” said Wilkinson.
But Wilkinson immediately noted Alberta does not have a carbon tax on consumer fuels like gasoline, natural gas and propane, and so the federal carbon tax for consumers, starting at $20 a tonne, will start being applied in the province on Jan. 1. And Alberta’s Environment Minister Jason Nixon said the province’s legal challenge over that, filed earlier this year, will continue.
Lower courts have already dismissed similar challenges from Saskatchewan and Ontario, and the Supreme Court of Canada is to hear the cases early in 2020.
Carbon taxes on big emitters are applied on a portion of emissions from major industry to encourage innovations that shrink their carbon footprints — more efficient processes that produce less waste, better capturing of greenhouse gases before they’re vented. The idea behind taxing only some industrial emissions is that technology doesn’t exist to reduce industrial emissions to zero, so the tax is generally only applied on the portion of emissions a company can reasonably be expected to eliminate.
In Alberta, more than half the province’s emissions come from industrial sources. More than 100 Alberta companies fall into the category that will pay the industrial carbon tax, including oil producers, coal and natural-gas power plants, fertilizer makers and chemical companies.
Consumer carbon taxes are applied based on all of the emissions produced by burning fossil fuels in cars and homes and small businesses. They are designed to encourage individuals to reduce their own emissions by driving less, making their homes more energy-efficient or buying zero-emissions technology like electric cars and home solar panels.
The federal government rebates a year’s average carbon-tax payments at income-tax time, so people who produce lower-than-average emissions can come out ahead.
The federal consumer charge has been applied in Saskatchewan, Manitoba, Ontario and New Brunswick since April 1. Alberta was initially among the provinces exempted because it had its own emissions-related fuel tax but Premier Jason Kenney scrapped that at the end of May after his United Conservative Party defeated the Alberta New Democrats in an election.
As it is doing in the other provinces with the federal carbon tax, Ottawa will also begin compensating Alberta taxpayers for the cost of the carbon tax.
Alberta set the $30-a-tonne price in its industrial system specifically to meet the federal requirement, but Kenney said Friday he hasn’t decided yet if the fee will rise to $40 and then $50 a tonne over the next two years, as federal standards require. He said that would just push more capital out of Alberta and contribute to “carbon leakage,” where emissions just move from one country to another when companies try to avoid carbon pricing.
“So we don’t think that helps global emissions and it certainly hurts the Canadian economy,” Kenney said. “We’ll have to make a prudent judgement when it gets closer to that date. Because one thing we don’t want is the federal government big-footing into Alberta and enforcing their own separate regulatory regime.”